AstraZeneca rallies on double upgrade from Morgan Stanley

The bank, which lifted AZN’s target price to 5,300p from 4,300p, said it has underperformed dramatically over the past year but looks set to reap the rewards of heavy investment, at an attractive valuation.

“Consensus expectations have moderated on Astra's pipeline ($13bn in 2023, previously $16bn), giving the stock good pipeline optionality over the next 12-18 months, notably with phase 3 readouts for Brilinta, benralizumab and lynparza,and launches for three new drugs,” it said.

MS raised its price target on ‘equalweight’ rated GlaxoSmithKline to 1,450p from 1,350p.

The bank said it reckons expectations have bottomed out after several years of continuous earnings per share downgrades, with double-digit earnings growth in full year 2016 as per management guidance.

Overall, Morgan Stanley maintained its ‘in line’ stance on EU pharma saying fair valuations, US pricing pressure and a less favourable emerging markets climate will likely offset active M&A and dense pipeline news flow.

It noted that European pharmaceuticals have outperformed the European market by 7% over the past 12 months and trade at a 13% premium on a 12-month forward price-to-earnings ratio, close to the five-year historical average of 11%.

At 1023 GMT, AstraZeneca shares were up 2.2% to 4,615p, Glaxo was 2.1% higher at 1,379p and peer Shire followed suit, trading up 2.7% at 4,762p.